Wednesday, October 28, 2009

I recently discovered that our state Medicaid program is incredibly inept at catching fraud. Why is this important, you ask? Because 60 Minutes just did a piece about how Medicare is being defrauded out of $90 billion a year because they too are inept at catching it.

4 comments:

People being the fallible creatures we are will always find a way to cheat. The easier a system is to cheat, the more fraud you will have.

The problem, IMHO, is the incentives in our system. If you pay providers based on the procedures that they provide, then they will do whatever they can to provide the maximum number of procedures - or at least to make you think they are doing so. A saner model (one that is not in any of the bills currently under consideration) would be to have primary care physicians paid by the person they care for, regardless of whether the individual only gets an annual physical or has weekly visits. The incentives should be on outcomes - keeping patients healthy.

The other problem we have particularly with Medicare and Medicaid is that we are too decentralized causing lots of redundant administrative work and lots more openings for fraud. Much of the money that should be spent on fraud detection is wasted on outsourcing and decentralization.

I reject the idea that government is incapable of running anything efficiently. There are however, a lot of politicians who have a vested interest in making it difficult for government to run efficiently because it serves their policy goals.

Not exactly. The ability to cheat has to do with how the system is structured, what the incentives are, and what the processes are like, not with who runs it. Private industry can be just as inefficient, if not more so, than government.

We don't have statistics on how much private insurance companies pay out due to fraudulent claims. They don't need to report it, they just raise the premiums to cover the losses. As I said, the problem is that we are paying for medical procedures not for health.

As was shown with the Medicaid audit and the 60 Minutes piece, government has less incentive to actively prevent fraud than does the private sector. In fact, the Medicaid audit showed that most of the fraud that Utah does find is actually found by the private sector instead. That's astounding ineptness of structure, incentives, and processes - all run by the government.